The Republican “Big Three” leadership – the Governor, Lt. Governor and a newly minted House Speaker – remained politically unified, focusing their legislative energies on core policy issues like property tax relief and school finance reform, and largely avoided the more divisive social issues.

Why the newfound synergy? Look no further than the November 2018 elections; Republicans lost 12 State House seats, 2 incumbent Senators along with 2 Congressmen, and several statewide elected officials (including Lt. Governor Patrick himself) survived closer-than-expected elections.

(For perspective, however, the Democrat candidate receiving the most votes, U.S. Senate candidate Francis “Beto” O’Rourke was still only the 9th highest vote getter in the state).

It was apparently enough to scare Republicans straight. What resulted was a moderated Big 3 and Legislature that focused more on difficult issues like taxes and education reform – generally only addressed under court order – and less on social issues such as the so-called ‘bathroom bill.’

While one could argue it was pragmatic politics, let’s also give credit where credit is due.

Most new legislation went it effect on September 1. The following summary of “Major Legislation of the 2019 Session” comes courtesy of my friend and colleague, Royce Poinsett of Poinsett PLLC. See also my FORECAST of what’s ahead, below.

Texas legislators filed more than 7,300 bills in 2019, and enacted over 1,400 into law. Some of the most significant legislative action is summarized here.

State Budget. HB 1 enacts a two-year balanced state budget with $250.7 billion in overall spending. This is an increase of more than 16 percent over the prior biennium, made possible by a healthy Texas economy and energy sector. Much of the new spending went to the top legislative priorities: $6.5 billion for public schools and $5.1 billion to “buy down” Texans’ property tax bills (see below).

The legislature also authorized a record-breaking $6.1 billion withdrawal from the Economic Stabilization Fund (or “rainy day fund”) for large-scale infrastructure projects and Hurricane Harvey recovery. However, the state continued its stinginess on health and human services programs, budgeting just 1 percent more than in the prior budget and cutting Medicaid spending by $900 million.

Property Tax Reform. SB 2 bars cities, counties and special districts from increasing property tax collections more than 3.5 percent in any year without a vote of the public; school districts are capped at 2.5 percent. (This is a major restriction from the current cap of 8 percent.) Democrats and local officials warn that the new tighter revenue limits could seriously disrupt local budgets and services.

School finance reform. The legislature accomplished something many insiders thought impossible: enacting wholesale school finance reform without a court mandate. HB 3 provides a total of $11.6 billion in new state funding for public education: (i) $4.5 billion for a 20 percent general increase in per student baseline funding, and targeted funding increases for pre-kindergarten programs, 3rd grade reading proficiency and dyslexia; (ii) $2 billion for an average salary increase of $4,000 for teachers, librarians, nurses and counselors; and (iii) over $5 billion for “buying down” school districts’ maintenance and operation tax rates to provide taxpayer relief (an average of 8 cents per $100 property valuation in 2020 and an additional 5 cents per $100 property valuation in 2021).

HB 3 will also provide future school tax relief by limiting local school property tax growth to 2.5 percent per year (absent voter approval). And because the state government is increasing its share of public education funding from 38 percent to 45 percent, it is decreasing the “Robin Hood” recapture payments required from wealthy districts by $3.6 billion per biennium, or 47 percent, overall.

Even with the passage SB 2 and HB 3, Texans are unlikely to see their property tax bills fall in absolute terms, as increasing home values will continue to drive those bills upward. But the reform package should prevent the dramatic increases Texans have been seeing in high growth areas.

Many observers caution that the state may need to seek new revenue sources in future sessions if it is to sustain these billions in new school spending commitments in future budgets.

Abortion. The legislature declined to consider Alabama-style challenges to Roe v. Wade, but did enact less ambitious restrictions. SB 22 prevents state and local governments from partnering with abortion providers like Planned Parenthood, even on non-abortion health programs.

Guns. The legislature failed to enact the “constitutional carry” handgun rights (i.e., carry without licensing) promoted by some gun rights activists. But it did enact HB 302 permitting tenants to possess lawfully owned firearms in leased dwellings regardless of landlord objections, and SB 535 allowing licensed handgun owners to carry their arms in places of worship (unless expressly prohibited by the institution).

State vs. Local Control. The revenue limitations in SB 2 and HB 3 are obviously fairly extreme examples of state preemption over local control. On the other hand, cities were successful in defeating legislation that would have removed their ability to enact local ordinances requiring employers to provide paid sick leave, or regulating short-term rental companies like Airbnb.

Tobacco. SB 21 into law prohibits the sale of cigarettes, e-cigarettes and other tobacco products to Texans younger than 21.

Cannabis. The legislature failed to pass legislation decriminalizing “marihuana” (or even a bill updating its anachronistic statutory spelling). But HB 3703 does expand the medical conditions for which low-THC medical cannabis, or CBD oil, can be legally prescribed to include MLS, ALS, Parkinson’s disease, terminal cancer, autism and many kinds of seizure disorders.

Red light cameras. HB 1631 bans red light cameras across the state, although it does permit current contracts for the devices to continue until their expiration dates.

Breastfeeding and pumping. HB 541 clarifies state law to make clear that women in Texas are allowed to pump breast milk, not just breastfeed, anywhere in public.

News Laws that Affect the Real World

Attorneys should always be prepared to answer the eternal cocktail party question: “Did this year’s legislature change any laws that affect my daily life?”

Win for Big Lemon. HB 234 allows young Texans to legally run lemonade (and other nonalcoholic beverage) stands on private property and public parks, overriding any local government or neighborhood association objections.

Back in Brass. Building on the legislature’s legalization of switchblades in 2013, HB 446 ends the state’s ban on “brass knuckles.”

FORECASTING

The 2020 elections will determine who controls the re-drawing of legislative district lines (aka redistricting) when the 87th Texas Legislature convenes in January 2021 so every competitive race will be as hotly contested as 2018.

Texas Democrats need to flip 9 seats to control the Texas House for the first time since 2000. (At 19-12, the Texas Senate is out of reach for Democrats)

I have maintained that 2018 was likely an aberration driven by “Beto” enthusiasm, the whopping $80,000,000M spent by Democrats in the state, and straight-ticket voting (no longer an option for voters).

We shall see.

Republicans will not have the widely popular Governor Greg Abbott at the top of the ticket and it’s unclear if President Trump will boost or drag down ballot candidates. Based on recent GOP congressional retirements, they may be sensing the latter.

If the economy continues to flourish and the property tax ‘buy down’ holds up for the next twelve months then expect Republicans to survive in 2020. But, the state’s demographics are changing rapidly with an ever-growing Hispanic population that voted roughly 65/35 for Democrats in ’18 and in-migration from more liberal states that could also change our politics faster than I would otherwise anticipate.

Historically, the every-10-year redistricting session is contentious and 2021 will be no exception. Even if the GOP maintains control, it’s likely the margin will continue to narrow. I’ll have more on policy matters in a later edition.

The 86th Texas Legislature adjourned ‘Sine Die’ — a Latin term meaning ‘without a day’ or if you’re more layman than Latin “let’s head to the house” — on Memorial Day.

And they ended much like they started – in agreement on the 2 big ticket items of school finance reform and property tax relief.

The Big 3 leaders – Governor Greg Abbott, Lt. Governor Dan Patrick, and newly minted House Speaker Dennis Bonnen – came to agreement on the last weekend of the session but lest you were worried that the clock would run out.. https://www.youtube.com/watch?v=1k8craCGpgs

As we predicted in January, the 86th session was in fact a ‘blocking and tackling’ session, focused mostly on the fundamentals.

Here are a few details on the school finance and property tax package:

The total of the spend and cuts is $11.6B.

The state is increasing its share of public education from 38% to 45%, with an additional $4.5 billion going into classrooms.

There will be a total of $5B in statewide property tax relief for homeowners in the next 2 years.

The ‘Robin Hood’ approach to school finance is being decreased by 47%, helping districts like Austin keep more money at home.

The amount taxes can be increased is capped – for school taxes @ 2.5%; for cities/counties @ 3.5%, without a vote of the people.

All public school teachers will get a $4,000 raise and be eligible for incentives and bonuses.

Low income students will get pre-K education – a priority for Governor Abbott – and dyslexia allotments are increased.

All in all, Lt. Governor Patrick called them “transformational ideas”

The so-called ‘tax swap’ – lowering property taxes while raising the state sales tax by 1% to make up the difference – didn’t survive.

And they did it while balancing a $ 250 billion dollar 2-year state budget. (It’s true – the state Constitution requires it.)

Pundits have observed that it wasn’t a great session for the business community but a better system of education will ensure Texas students can fill the jobs being created and attracted to the state, and lower property taxes helps everybody.

Before adjournment, Speaker Bonnen told his House colleaguess: “it was a good session, members.” Some of us are just glad those days are over.

AUSTIN— This week, Quorum Public Affairs, Inc. (QPA) Founder and Chief Executive Officer, Craig Casselberry, announced the celebration of the company’s 25th Anniversary.

The company was founded in Houston in 1994 when Casselberry left the staff of then-state Agriculture Commissioner, former Governor, and now U.S. Secretary of Energy, Rick Perry. Casselberry previously served on the campaign staff and then as a policy aide to Governor Bill Clements, on the Texas Inaugural Committee, and with the Texas Legislative Council.

“I had no idea we’d be around 25 years later; I guess no entrepreneur really does. But I feel very fortunate and thankful to all of those who helped the company and me get where we are today,” said Casselberry.

The company is perhaps best known for introducing grassroots advocacy to influence public policy and regulatory matters in Texas. QPA re-located to Austin in 2000 and began offering a full suite of services to Corporate America in the public and government affairs space. In its history, the company has hired more than 100 professional consultants throughout the state and country.

“In 1994, the idea of engaging the public on legislative matters was trending in Washington, D.C. but not at the state level,” Casselberry said. “We bet that the trend would migrate to the state level – particularly big states like Texas—and it did. Of course, our business has cycled like any other but we stayed afloat and kept going. I’m proud of that”

QPA’s client history includes Fortune 50 companies including Exxon Mobil, Wal-Mart, Pfizer, Dell Technologies, USAA and State Farm; early and mid-stage firms looking to grow; and major coalitions like Texans for Lawsuit Reform; the Texas Coalition for Affordable Insurance Solutions; Texans for Economic Progress; and the Texas Coalition for Capital.

In 2011, QPA was sold to the largest public relations firm in the world at the time. Casselberry re-launched QPA one year later.

Casselberry has been actively involved as a consultant, financial contributor, or volunteer in five presidential elections (including the statewide leadership team for two of those campaigns); nine gubernatorial campaigns; and numerous other state and local races.

Drawing on his 30 years of public and private sector experience, Casselberry authored “Straight Up: The Business of Winning Politics, Communication Strategies for Innovative Companies.” The book provides a roadmap for companies to effectively advocate for a public policy, a corporate brand, or a product, and the strategic relationships to achieve optimum results.

“Over the last five years, I have valued Quorum Public Affairs for their focused, integrated approach, their knowledge of the issues and the Influencers, and their ability to achieve measurable results.”

“Our partnership with Quorum Public Affairs has been a great one for my company and our clients. Together, we combine my firm’s national technology network with Quorum’s state-level relationships. And we have a shared goal: helping our clients grow their business.”

Karen Robinson, CEO, KWR Strategies

“In Quorum Public Affairs, Cypress Equities found a partner that combines strategic counsel with results-oriented action. The Quorum team is skilled, well-connected, and professional. Their issue-related focus and long-term vision advanced our business interests.”

Chris Maguire, Chief Executive Officer, Cypress Equities, Inc.

“I’ve known Craig for 30 years and can you tell that in Austin, Quorum Public Affairs is known as a ‘go to’ firm if you want solid relationships and positive visibility at the Texas State Capitol and throughout the state. He’ll get you measurable results and his company’s network is second to none.”

Tom Kowalski, President and CEO, Texas Healthcare and Bioscience Institute

“With great leadership from Quorum Public Affairs, CorVel now has solid relationships and positive visibility in Texas. Our commitment to Texas, both in terms of economic impact and subject matter expertise, is now much more widely acknowledged with state officials and industry stakeholders.”

The 86th Texas Legislature has convened in Austin with virtually no drama. Even the election of a new House Speaker went off without a hitch.

Rep. Dennis Bonnen was elected to the Speaker’s Chair with bipartisan support.

Comptroller Glen Hegar provided his budget forecast for the next 2 years. Hegar says we’ll start with a budget that’s 8% healthier than last biennium and includes a $ 4B surplus.

He also says our “Rainy Day” fund will grow to a record amount of $ 15B dollars by the year 2021.

Governor Greg Abbott was sworn in for a 2nd 4-year term with the customary pomp and circumstance and the King of Country headlined the Inauguration. It doesn’t get much better in the Lone Star State.

For the moment, it’s a Love Festival at the State Capitol.

But.. how to spend the money could change that.

There’s consensus that the way we pay for schools needs reform and property taxes need to be lowered.

Hurricane Harvey bills must be paid and a shortfall in Medicaid has to be covered.

The rest will likely go to schools, lowering property taxes, infrastructure, yet more money for Medicaid, and economic development.

The school finance conversation will include emphasis on results and skills training so Texas students can fill the jobs the state is creating in record numbers.

We can dream.

It’s also clear that Texans want lower property taxes; can officials do that without raising other taxes or fees?

The Governor IS expected to ask for a sizable chunk of change for the Texas Enterprise Fund for large jobs projects and a program called “Chapter 312” that allows communities to abate property taxes to bring jobs will be hotly debated.

And the state Constitution says the Legislature must do all of that in the next 140 days (barring a special session that only the Governor can call).

So to use an NFL metaphor, this session will center on the fundamentals of blocking and tackling like education and taxes, with less emphasis on side issues. Let’s hope the session ends as well as it’s started.

The 86th Texas Legislature will likely serve up a large helping of Meat and Potatoes.

The agenda is fundamental, it’s basic, and may be sans gravy.

And the kids are hungry.

With school finance a top legislative priority, a conversation about taxes, the state budget, and how to pay for it all is guaranteed.

That conversation might even lead to a more equitable way to pay for our schools and improve student achievement so Texas students are equipped to fill the jobs the state is creating and recruiting. We can dream.

In fact the issue is of high enough importance that an interim committee studied the issue and Governor Greg Abbott has proposed a solution: “Improving Student Outcomes and Maintaining Affordability through Comprehensive Education and Tax Reforms.” Historically, only a court order has moved state officials to act on this hot potato topic. Kudos to the Governor, Lt. Governor Patrick, and outgoing Speaker, Joe Straus, and interim committee chair, Sen. Bettencourt, for prioritizing the issue.

According to Ross Ramsey at the Texas Tribune, in the state’s 2019 fiscal year the local share of school finance spending is estimated to be 55.5 percent of the total, while the state’s share is expected to be 35 percent, according to the Legislative Budget Board. The rest comes from the federal government. The last time the Texas Legislature tackled school finance, the local and state shares matched; years of rising property values and with them, rising local property tax revenue, have allowed the state to lower its share. If you do some quick arithmetic on those 2019 estimates, it would take a $5.7 billion increase in annual state spending to rebalance the state and local shares of public education spending. Doing that would put them both back where they were in 2008 — each covering about 45 percent of the load.

Texas property owners have made it clear to their representatives that they want lower property taxes. Cutting everyone’s current most-hated tax is the only way to explain so many conservative legislators making serious noises about increasing state revenue. Given the way the state pays for public education — with a combination of local property taxes, and state and federal funding — the only ways to lower property taxes are to cut public education spending or to find money elsewhere to offset property tax cuts.

As a backdrop, the politics at the Texas State Capitol have changed. Even with Democrat gains in last month’s elections (Democrats gained 1 net State Senate seat and 12 House seats), Texas still has a Republican-dominated state government, with GOP majorities in both the House and Senate, and Republicans in every statewide office.

So, the idea of new revenue remains anathema to the large majority of Texas legislators.

The 2-year state budget will be tight. The Legislature has to pass a “supplemental appropriations bill” to take care of shortages in the current budget, Hurricane Harvey recovery costs, and others. Early projections are that they’ll start more than $5 billion short of what they need for the next budget — and that’s before they consider the expensive school finance problem.

Threading the political needle for Republicans will be tricky. How do you lower property taxes to keep constituents happy and accomplish that expensive task without raising taxes or fees or removing certain tax exemptions. New money could come from eliminating exemptions, from property appraisal reforms, from raising existing tax rates or creating new taxes like (and don’t bet on this one) legalizing sports gambling and taxing it (SCOTUS now says you can).

The plot thickened further this week when legislative leaders announced they want no less than $7.5 Billion dollars to stay in the state’s Rainy Day Fund and it’s $12.5 Billion dollar current balance. Theoretically, there’s your $5B to fund the aforementioned supplemental bill (which includes, appropriately, Hurricane Harvey recovery) to ‘true-up’ the current budget but does nothing to fix school finance.

On the economic development front, the Governor is expected to ask for a sizable chunk of change for the Texas Enterprise Fund to attract large jobs projects and the local tax abatement program – known as “Chapter 312” – that allows communities to abate property taxes will be hotly debated.

Legislators from rural districts are looking for ways to attract capital to their communities to retain jobs and expand facilities.

All in all, it’s a big plate and lots of mouths to feed. Don’t be late to supper.

The year 1992 saw the emergence of a popular TV series featuring a purple dinosaur named “Barney,” created and produced right here in the great state of Texas. The producers said Barney “conveys educational messages through songs and small dance routines with a friendly, optimistic attitude.”

The show was hugely popular with the 1-8 year old demographic. It left the air in 2009 but there has been talk of a return.

Around that time – 1994 to be exact – Texas Democrats began their slow decline to dinosaur-like status. That was, after all, the last year Democrats won a statewide race in Texas.

Flash forward to 2018, and purple may be returning to vogue. The question: Is Beto Barney reincarnate? They share some attributes, like optimism. And can he drag Texas Democrats with him?

Whether Election Day 2018 in Texas was a Blue Puddle, a Purple Wave, or as Lt. Governor Dan Patrick put it, “a win for conservative principles in Texas” may be subject to interpretation.

It may also involve an aberration or several, including the $80,000,000 Democrats spent on an upstart political star nicknamed “Beto” and a get-out-the-vote campaign that boosted the whole Democrat ticket and skewed the result.

In fact, Texas saw record turnout of 8.2M voters, more than 50% of eligible voters, a mid-term election record in the state. (Sidebar: this is the last year for straight ticket voting in Texas, for which some credit the Democrats’ down-ballot success.)

It may include the fact that this was, arguably, a national election as well as a Texas one. Democrats across the country were committed to a blue wave; they didn’t get one, but they spent almost 50% more than Republicans did trying.

Or it could include the fact that Texas Republicans got too hung up on unpopular social issues like the “bathroom bill” that turned off suburban women and young voters; and the influence of transplants from the coast (most notably California),

A combination of all of these factors may have manifested at the ballot box last week.

Yes – there are a lot of wild cards in play.

Make no mistake: Democrats made strides in Texas last Tuesday, knocking off 2 incumbent Texas Senators; 2 U.S. Congressmen; gaining 12 Texas House seats; and narrowing margins in most statewide races (with widely popular Governor Greg Abbott a notable exception).

Democrats won the major metros of Austin and El Paso (no surprise) but also Dallas, Houston, San Antonio and, for the first time in many years, Fort Worth.

And they won GOP suburban strongholds of Williamson, Fort Bend and others.

Despite it all, Republicans still hold all statewide offices in Texas and strong majorities in the Texas House (83-67) and Senate (19-11; 1 “D”-leaning race pending). And – despite the hype – Robert Francis “Beto” O’Rourke still received fewer votes than any the top 8 statewide Republican candidates. Or, for the math-challenged, he was just 9th in total votes statewide.

But let’s face it: Rural Texas was the Republican savior; GOP candidates got about 75% of the votes on average in the 224 counties outside the 30 most populous.

Voting by Hispanics, a vitally important constituency given their fast growing population, broke anywhere from 70-30 to 60-40 in favor of Democrats depending on whether you believe exit polling or the Pew Research Center. (The margin was higher for Democrats among Latina women). Hispanic influence will grow: over the next 10 years, 2 million Latinos will turn 18 in Texas and about 95% of them will be eligible to vote, according to a “We Are Texas” study. Whichever party does the best job over the next two years connecting with Hispanic voters may tell the tale in 2020.

Texas top two courts – the Texas Supreme Court and the Court of Criminal Appeals – remain in Republican hands. But Democrats flipped four influential state appeals courts that serve Austin, Houston and Dallas. Democrats now hold majorities on seven of the state’s 14 appeals courts. Before Tuesday, they held the majority on just three.

All told, if 2018 election results didn’t get the attention of Texas Republicans, they should have.